Energy and Morality 20 Years Later

Soaring energy prices rapidly turned last winter into a season of severe discontent. In the Northeast the price of residential heating oil rose by more than 50 percent since the previous winter. In the Midwest homeowners paid at least 60 percent more for natural gas. In California households braced for exorbitant electricity bills and rolling blackouts. Industry experienced in some instances a 70-fold increase in utility bills. The situation stirred comparisons to the bad old days of the 1973-74 and 1979-81 oil crises.

Energy economists assure us that this price spike was fundamentally different from those of the 1970’s. Those disturbances resulted from oil embargoes, revolutions, abrogation of supply contracts and other international dramas. This winter’s cost squeeze resulted from benign neglect of the nation’s energy infrastructure. Mild winters, regional recessions and other market conditions of the late 1990’s reduced energy demand, energy prices and investment in the energy industry. Lack of investment reduced our ability to produce energy and to accommodate recent growth in demand. A classic supply/demand imbalance boosted prices. Though it certainly provides little solace to those who had to pay this winter’s heating bills, the good news is that higher prices stimulated enough investment to prevent long-term price increases.

This price spike also entails new moral issues. The oil crises of the 70’s raised a number of critical questions about the moral consequences of energy production and use. But since that era, energy markets have changed radically. Assumptions that seemed irrefutable in 1980 have become indefensible in 2001. The new realities are generating new questions about the morality of our energy production and consumption. These new questions call for new leadership.

Energy and Morality in 1981

The 1970’s oil crises, which left most Americans fuming in gasoline lines, shivering in homes with lowered thermostats and fearing what a tenfold increase in oil prices might mean for our economic future, also prompted the U.S. Catholic Conference to issue Reflections on the Energy Crisis: A Statement by the Committee on Social Development and World Peace, a letter about energy and morality. In it they identified three leading links between energy and morality.

“Oil wars” constituted their greatest concern. Tight supplies, high prices and government rhetoric helped justify the fear that “the black seed of the final holocaust may lie beneath the sands of the Middle East.” President Jimmy Carter added to the concerns when, in 1980, he announced that “any attempt by an outside force to gain control of the Persian Gulf will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.”

Energy and poverty emerged as the second leading issue. In keeping with conventional wisdom in 1980, the authors of Reflections predicted an unrelenting surge in energy prices. Standard 1980 predictions put 2001 oil prices at well over $100 per barrel. Church leaders expressed concern that the increases in energy prices would force the poor to make treacherous choices “between fuel and decent clothing, fuel and health care, even fuel and food.”

In addition to these two issues, the letter conveyed serious moral concerns about the ways in which energy production and consumption hurt the environment. Acknowledging that “we cannot obtain adequate energy supplies without imposing some costs on the environment,” the letter went on to warn that energy production and consumption patterns have made the U.S. consumer into something of a “heedless exploiter and destroyer” of nature.

Supply and Price

The moral concerns outlined in 1980 reflected two larger assumptions. First, the letter reflected the popular view that oil supplies were dwindling rapidly. The U.S.C.C. claimed that “it is only a matter of time until oil and gas production peaks and starts to drop.” The authors of the letter relied heavily on an analysis that asserted a 1970 peak in U.S. oil output, a 1995 peak in global petroleum production and the virtual disappearance of U.S. oil and gas by the year 2000.

Second, the letter claimed that reductions in oil supplies would lead to rises in energy prices. Referring to federal legislation to assist low-income people in paying their fuel bills, the authors claimed, “It acknowledges the fact that the days of cheap and plentiful power are over.”

The last two decades have invalidated both of these assumptions. Although U.S. petroleum reserves have declined from 33 billion barrels in 1980 to 21 billion barrels in 2000, the world’s proven reserves have risen from 435 billion barrels to over a trillion barrels. Similarly, while U.S. proven reserves of natural gas declined somewhat between 1976 and 1996, from 212.3 trillion cubic feet (tcf) to 163.3 tcf, the world’s reserves more than doubled from 2,300 tcf to 4,900 tcf.

The growth in energy supplies has contributed to a significant decline in real (adjusted for inflation) energy prices since 1980. Oil prices have collapsed twice in the last two decades, once in the mid 1980’s and again in the late 1990’s. The inflation-adjusted price of gasoline (including taxes), a key marker of energy prices, fell from the equivalent of $2.14 in 1981 to $1.24 in 1997. Whereas conventional wisdom in 1980 predicted that oil would cost well over $100 per barrel in 2001, the current price is fluctuating around the $30 mark. The Energy Department now predicts that crude oil prices will return to the $20 range within two years.

Energy and Morality in 2001

Two decades of supply and price developments have transformed each of the concerns expressed in Reflections. Most obviously, “oil wars” pose much less of a direct threat than they did in 1981. Because the current price squeeze has virtually nothing to do with “outside forces,” no oil war will fix it. Moreover, greater interdependence between oil producers and customers has improved our ability to find nonmilitary solutions to conflicts that do emerge. The Persian Gulf war provides a stark reminder that oil wars can happen, but the overall probability of an oil war has diminished considerably since 1981. Finally, emerging disruptions now occur in a post-cold-war context. Thus, the prospect of an oil-based “final holocaust” has receded considerably.

The question of energy and poverty has also changed. Short-term price hikes, like this winter’s, obviously impose onerous burdens on the poor. But these jolts have become a short-term phenomenon, not the long-term trend that was anticipated in 1980. The challenges embedded in short-term relief vary greatly from those associated with long-term assistance.

The low-price environment has also reconfigured the relations between energy, morality and the environment. Low energy prices have actively discouraged conservation. U.S. energy use per capita fell between 1970 and 1986, when prices were high, but rose as energy prices fell after 1985. Similarly, energy intensity (energy use per dollar of gross domestic product) declined by 2.3 percent per year during the years of high prices but fell by only 1.3 percent per year when prices were low. Depressed prices for fossil fuels have also thwarted the development of alternative fuels. Renewables, which satisfied less than 5 percent of the nation’s energy requirements in 1980, still satisfied less than 5 percent of the nation’s energy requirements in 2000. Continued reliance on fossil fuels simply exacerbates the environmental and moral issues treated in the 1980 letter.

The current situation generates two moral questions about prevailing patterns of energy production and consumption. First, we need to ask ourselves if we are doing enough to insulate the poor from burdensome short-term spikes in energy prices. Experiences like this winter’s should cause us to re-evaluate the effectiveness of federal and state programs such as the Low Income Home Energy Assistance Program. This program, and others like it, are clearly providing much needed help, but are they doing enough to protect the poor from having to choose “between fuel and decent clothing, fuel and health care, even fuel and food?” This winter’s situation might also prompt us to ask if we are doing enough to help the poor reduce their fuel requirements. Programs to meet fuel bills are invaluable, but programs to help poor people insulate their homes (even if they are rented), trade in gas-guzzling cars or use more efficient appliances will provide even greater relief.

The second major moral question pertains to overall fuel consumption. By just about any standard, we know that Americans use extraordinary amounts of fossil fuels and, in doing so, create a great deal of pollution. In 1995 per capita emissions of carbon dioxide in the United States remained at 19.9 tons. In Japan and the United Kingdom, the figure was less than 10 tons per capita, and for all of Africa the average was less than one ton. Our appetite for energy not only decreases the quality of the global environment; it also imposes local and regional burdens such as oil spills and disruption of wilderness areas. We also know that low fuel prices increase our tendency to waste fuel and increase the associated pollution. Thus now, even more than in 1980, when it seemed that price increases would curb the wasteful use of energy, we must find new incentives for reducing wasteful energy use. Given that the price spikes will fade, the issue of chronic overconsumption must be regarded as our most pressing moral/energy issue.

Energy and Leadership in 2001

The pattern of chronic overconsumption seems unlikely to go away on its own. Without high prices to alter consumption, we might look to the church, the state or industry to lead us.

Many religious organizations have issued statements about morality and the environment. Some of those statements touch on the morality of energy production and use. Recent years have even witnessed the emergence of Episcopal Power and Light, a San Francisco-based organization that promotes the use of renewable energy. Within the Roman Catholic Church, a number of activists are helping to transform the way energy markets work. Catholic bishops, needing to set priorities and preserve moral capital, approach the issue with recognizable caution.

Recent developments suggest that the U.S. government is unlikely to promote new patterns of energy production and consumption. The collapse of the COP6 talks, an international conference to implement Kyoto’s carbon-reducing strategies, indicated that, even when Democrats were in the White House, the U.S. government refused to push for reduction in energy use. The recent Republican victory and the appointment of New Jersey’s former governor, Christine Whitman, as head of the E.P.A. leave ample reason to wonder if the government will provide the required leadership.

The strongest leadership, ironically enough, seems to be emerging from the private sector where many firms are banking on major alterations in fuel use. Shell publicly talks about renewables as a major energy source. British Petroleum imagines a world “beyond petroleum.” Ford, Honda and Toyota are promoting their “smart cars.” Appliance makers are finding efficiency profitable.

Though corporate operations might not be designed specifically for the sake of the environment, they certainly seem to be unfolding in accord with environmental health. Given the choices, their green options offer the greatest promise—and merit serious attention.

F. G. Hank Hilton, S.J., is a professor of economics at Loyola College in Baltimore, Md.